Bitcoin, its Nodes and the Main Principles of its Network
No doubt that Bitcoin is the most popular cryptocurrency right now. It was the first-ever crypto, launched in 2009, and for many years all the other cryptocurrencies were just the copies of Bitcoin code with subtle changes. Bitcoin is the standard on the crypto market, its capitalization equals to 60+% of the whole crypto market and now it goes mainstream marketed as the digital gold. How does it work and why is it so popular? Let’s find out.
The History of Bitcoin
The early version of the Bitcoin blockchain was developed by Satoshi Nakamoto with a team of enthusiasts as an experiment of creating a private digital currency for p2p payments. Satoshi disappeared shortly after, in 2011, but the community continued to develop the network. Bitcoin quickly got the attention of many tech geeks and became popular as the means of payment in the Darknet. People started to buy and sell Bitcoin on special crypto exchanges, other people started to mine it and the whole new industry of alternative finances emerged. While it’s all clear with the trading activity, mining is something that general audience doesn’t understand. However, it’s a pretty easy concept.
Bitcoin Mining Nodes
All Bitcoin nodes can be divided into two types: lightweight nodes and full nodes. Lightweight nodes are for those users who send and receive crypto. They pay for transactions and don’t keep the whole blockchain on their computers. Full nodes are another story. They verify Bitcoin transactions and protect the network from being attacked. To determine who is going to generate the next block in the blockchain, miners solve a very complex math problem, proof of work, and the first one who does it and transmits it to the others, gets the reward. This task requires a lot of computational power, and as more and more miners join the network, the difficulty of computations increases gradually. After finding the answer, the miner node adds all transactions to the new block and transmits it to the network.
The Importance of Bitcoin for the Whole Industry
No doubt, Bitcoin is still the most important cryptocurrency. Many crypto traders have the goal of increasing their BTC funds, instead of getting more dollars. Even though the SEC still doesn’t allow anyone to create a Bitcoin ETF, the mainstream finance has already gotten into Bitcoin trading with the help of the largest brokerage provider, ICE, which created Bakkt, an exchange for institutional players. From the technological point of view, Bitcoin might be not the fastest network, but it’s the safest one, protected by the quantity of its nodes. At this point, it’s impossible to gain control over the Bitcoin blockchain, as it requires enormous computational power. That’s why more and more wealthy people prefer to buy some to diversify their portfolio — because it’s the safest bet in crypto right now, Bitcoin is too big to fail. And it looks it’s not going to change in any observable future.
Originally published at getblock.io on August 18, 2020.